Italy's big data tax reform

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In Italy, 285 billion euros go unpaid. That is approximately 18 percent of the country's GDP. If the new tax collection solution cooked up there--and aided by big data--is a success, it will raise the level of paranoia about surveillance and privacy to new heights, and deservedly so.

The method of tax collection, known as the "Redditometro," became law on Jan. 4 and is targeting scofflaws by tracking all spending and then correlating that spending to reported income, to see if the two are out of line.

The idea was developed by the Italian Revenue Agency and is being called "big government meets big data."

The Economist pointed out that Italy's tax authorities already know a lot about what people do with their money. All residents have a "unique tax number they have to provide for a wide range of transactions, such as utilities contracts, home mortgages and insurance policies," the publication said.

For everything else, it will use nationwide statistics and formulas to estimate spending, The Economist said.

The system will flag tax returns in which the declared income differs from the taxpayer's estimated spending by more than 20 percent, it added, and those who fail the test will be asked to justify their returns.

The Redditometro will start by examining income taxes from the 2009 tax year, according to Tax-News.

For more:
- see The Economist article

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